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December 10, 2012

Apple Attains Dreaded ‘Death Cross,’ Experts Shrug

‘The data is fairly inconclusive, but if it shows anything, it is that a death cross implies better performance,’ one analyst writes

The headquarters of Apple in Cupertino, Calif. (Photo: AP)

Hindenburg Omen, Skyscraper Curse–technical indicators of a coming crash have ghoulishly clever names attached to them (with the exception of the Hemline Index), and one has now attached itself to the country’s most successful company.

“Charts register a death cross when both short- and long-term trend lines start to point south, as evidenced by a stock or benchmark’s 50-day moving average cutting below its 200-day moving average,” according to The Wall Street Journal’s MarketBeat blog. “The crossroads suggest to some that recent declines could turn into a longer-term slump.”

And while it affects individual companies, it can also apply to the economy as a whole, based on data embodied in various market indexes and sector funds.

It points to Collin Monsarrat, an analyst at Birinyi Associates, who says Apple shares have suffered through five death crosses dating back to November 2000.

“The data is fairly inconclusive, but if it shows anything, it is that a death cross implies better performance,” he says. “The stock has tended to struggle for the week and month following the cross, but three months later the stock has tended to be not only up but outperform the S&P 500 60% of the time.”

He adds a combination of Apple losing tablet market share to competitors such as Microsoft Corp., Amazon.com, Google and Samsung as well as reports of clearing firms hiking margin requirements and negative technical developments weighed on the stock. Overall, trades say confidence in Apple has clearly been rattled in recent months.

When it comes to the death cross, keep in mind only five examples for Apple is a pretty small data set, the blog explains. Generally speaking, death crosses in stocks and indexes are viewed negatively in the world of technical analysis.

For Apple, perhaps it’s no big deal, it concludes.

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Check out this prediction on the economy regarding the Death Cross at AdvisorOne.